China Eximbank provides RMB 249 million government concessional loan for Zambezi Valley Agricultural Processing Plants Project

Project narrative

On February 23, 2009, China Eximbank and the Government of Mozambique signed a RMB 249 million government concessional loan (GCL) agreement for the Zambezi Valley Agricultural Processing Plants Project (captured via Record ID#33904). The loan carries a 20 year maturity, a 5 year grace period, and an estimated interest rate of 2%. Its first scheduled principal payment date is March 21, 2014 and its last scheduled principal payment (maturity) date is March 21, 2029. The loan's (principal) amount outstanding was $18,321,613 as of December 31, 2022. Additionally, on February 23, 2009, China Eximbank and the Government of Mozambique signed a RMB 129 million government concessional loan (GCL) agreement for the Zambezi Valley Agricultural Machinery and Related Equipment Purchase Project. The loan carries a 20 year maturity, a 5 year grace period, and an estimated interest rate of 2%. Its first scheduled principal payment date is March 21, 2014 and its last scheduled principal payment (maturity) date is March 21, 2029. The loan's (principal) amount outstanding was $9,449,080 as of December 31, 2022. The proceeds of the RMB 249 million of the loan were to be used by the borrower to build a cotton processing plant in Guro district within Manica Province, a rice processing factory in Namacurra district within Zambezia Province, and a maize (cornmeal) processing factory in the town of Ulonguè within Angónia district and Tete Province. The proceeds of the RMB 129 million loan were to be used for the acquisition of Chinese agricultural equipment and machinery, including tractors, rotovators and trucks. This equipment was subsequently sold by SOVALE, a company in which the Zambezi Valley Planning and Development Office (GPZ) and SOGIR (a company partly owned by GPZ) hold equity stakes. The ultimate objective of this project was to improve agricultural production by local farmers. China CAMC Engineering Co., Ltd. and Beijing Urban Construction Group Co., Ltd. were the contractors responsible for implementation. The earliest evidence of a groundbreaking ceremony for the project came on November 10, 2010 -- for the construction of the cotton processing factory in Guro. Then, on April 30, 2011, a groundbreaking ceremony was held for the rice processing factory in Namacurra. In August 2012, the project was completed as planned. There are some indications that the China Eximbank loans for the Zambezi Valley Agricultural Processing Plants Project and the Zambezi Valley Agricultural Machinery and Related Equipment Purchase Project may have financially underperformed vis-a-vis the original expectations of the lender. In 2016, several credit rating agencies downgraded the Government of Mozambique to 'selective default' or 'restricted default' status, and the World Bank and the IMF re-classified Mozambique's external debt as 'in distress.' In January 2017, the Government of Mozambique defaulted on a coupon payment for its dollar-denominated Eurobond. Then, in February 2018, the International Monetary Fund (IMF) announced that the Government of Mozambique had accumulated $710 million in arrears to external creditors and had agreed to reschedule some bilateral debt service payments with the Chinese Government. Two months later, in April 2018, Stelia Neta, a National Director at the Ministry of Finance of Mozambique revealed that the Government of Mozambique’s outstanding debt obligations to the Chinese Government amounted to $2.02 billion and the Chinese Government had agreed to extend the grace periods (and first principal repayments) on these outstanding debt obligations without changing their final maturity dates or interest rates (as captured via Record ID#66283).